Economic net income -a metric analysts monitor that reflects private equity firms' underlying operations and excludes special charges such as those linked to KKR's initial public offering - fell to 36 cents a share from 48 cents. Analysts polled by Thomson Reuters had expected earnings of 40 cents a share on revenue of $195m.

Profits calculated on generally accepted accounted principles rose 32% to $39.6m on higher assets under management and a 35% rise in revenue to $117.6m.

KKR's earnings miss highlights volatilities in reporting marked to market values of portfolios at a time when markets have steadied following the huge plunge and rebound of the financial crisis.

Gains from KKR's investments in underlying funds and co-investments fell to $150m from $255m a year ago on "less significant appreciation" in assets than in the year earlier period, thus hurting economic net income.

Its private equity portfolio appreciated by 3.8% in the second quarter and 10.1% in the first half, coming off the extremely high returns of more than 30% last year.

"Our private equity investments outperformed the S&P 500 by nearly 400 basis points for the quarter," said Henry Kravis and George Roberts, co-founders, co-chairmen, and co-chief executives in a statement.

But recent market volatilities may spell further woes in upcoming earnings, as share prices of publicly listed portfolio companies take a hit.

During a conference call to discuss the results, executives said hospital operator HCA Holdings' 30% plunge in share price since the end of the second quarter, if booked on the balance sheet right now, would be reflected as a loss of around $150m in fair value and $69m in performance fee or "carry."

"HCA is still well over three times its cost," said Craig Larson, KKR's head of investor relations.

But overall, KKR said it expects to benefit from choppy market conditions as institutional investors switch to alternative investments from traditional means of trading.

"Maybe it's counter-intuitive. But when everybody's scared, we get pretty excited," said Scott Nuttall, KKR's head of global capital and asset management. "This environment is creating some pretty interesting supply demand imbalances and we're stepping into that imbalance and making some pretty investments."

He highlighted opportunities in European banks' sales of assets and lending to middle market companies, where banks and traditional sources of financing are "gone or impaired."

The company, which switched the listing of its shares to the New York Stock Exchange in July 2010 from Euronext Amsterdam, had $61.9bn in assets under management as of June 30, up 14% from a year ago, on continued investment appreciation and new capital raised.

It also reported seven sales of companies, expected to realise more than $2bn, or 2.4 times its initial investments. Executives said an announced sale of Hilcorp Resources is expected to generate a cash distribution of 6 cents a share in the fourth quarter.

KKR, which still has $13.7bn in uncalled commitments or "dry powder" for future investments, said its new long short equity hedge fund started to accept investors' capital this month. The team is run by former Goldman Sachs proprietary traders.